Stocks tumble. Dow down nearly 170 points.

US stocks tumbled at midday after reports about a trade deficit in China and weak jobless claims in the US.

March 10, 2011

In this file photo taken Feb. 25, 2011, trader Stephen Guilfoyle uses his handheld device as he works on the floor of the New York Stock Exchange. On March 10, the Dow index at midday had fallen nearly 200 points.

The S&P 500 tumbled below 1,300, while the tech-heavy Nasdaq plunged to nearly 2,700, before recovering a bit. The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared above 22.

All key S&P 500 sectors fell, led by energy, materials and industrials.

China reported a surprise trade deficit of $7.3 billion in February, the largest gap in seven years, and its first since March 2010, sparking fear of a global slowdown that affected oil as well as other commodity prices.

Concerns over the unexpected Chinese trade deficit—a fact that would allow the Chinese government to keep the value of the yuan in check—are hurting materials and energy stocks, which depend on a growing Chinese economy, said Marc Pado, U.S. market strategist and technical analyst at Cantor Fitzgerald.

The news comes as technology stocks are already under pressure in the wake of Wells Fargo's downgrade of the semiconductor sector earlier this week, and Texas Instruments announcement that it's narrowing the range of its earnings guidance, Pado said.

On top of that, banks are feeling some pressure from sovereign debt issues in Europe, he said. Overnight, Moody’s,downgraded Spain's ratingto 'Aa2' with a negative outlook. Yields for Spanish debt rose following the downgrade.

"A combination of factors are individually hitting the top-performing groups," Pado said. "When you get scared like that, where you don't have leadership, you see a flight to safety...that flight to safety move is a negative for the market."

A surprising gain in jobless claims and a widening of the U.S. trade deficit, didn't help, Pado added.

Wells Fargo fell despite news on Thursday that it planned to issue a dividend with a 30 percent dividend payout ratio, and that it would buyback shares.

And HCAHoldings rose after it began trading on the New York Stock Exchange.The for-profit hospital chain and its shareholders sold 126.2 million shares in an initial public offering, priced Wednesday evening, that was oversubscribed and fetched $30 a share. The $3.5 billion deal was the largest for a U.S. company taken private by private equity firms.

Prices of U.S. Treasury securities roseas stocks fell. Theyield on the benchmark ten-year notes fell to 3.44 percent, down from 3.47 percent. The flight to safety comes on the heels of Pimco's Total Return Fund's decision to dump its U.S. government holdings.Bill Gross, Pimco's co-chief investment officer, has expressed concern over Treasurys because of U.S. government spending and deficits.

At 1 p.m., the U.S. Treasury will auction $13 billion of reopened 30-year bonds.

In economic news, jobless claims for the week ended March 5 rose 26,000 to a seasonally adjusted 397,000, according to the Labor Department. Claims had fallen to a 2 1/2-year low the week before. Economists surveyed by Reuters had expected claims to rise to 378,000 from a slightly upwardly revised 371,000 the week before.

The U.S. trade deficit widened by $6 billion to $46.3 billion, led by imports of oil, capital goods and cars. The gap was far more than the $41.5 billion expected by analysts, according to Reuters.